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China uses digital yuan to stimulate virus-hit consumption

Forex May 30, 2022 07:31AM ET
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© Reuters. FILE PHOTO: A sign indicating digital yuan, also referred to as e-CNY, is pictured at a shopping mall in Shanghai, China May 5, 2021. REUTERS/Aly Song/File Photo

SHANGHAI (Reuters) - China is using the digital yuan to stimulate consumption in its pandemic-hit economy, with more e-CNY applications expected in future to boost transparency and effectiveness of government policies.

The southern city of Shenzhen started distributing 30 million yuan ($4.50 million) worth of free digital cash on Monday to revive consumption and aid businesses. It comes days after Xiong'an New Area in northern Hebei province, launched a similar campaign to hand out 50 million yuan worth of e-CNY "red packets" as gifts.

China is at the fore of a global race to develop central bank digital currencies. Issuing e-CNY subsidies can both aid consumption and further promote use of the electronic yuan.

Transactions using e-CNY totalled 87.6 billion yuan at the end of 2021, with 261 million individual e-wallets opened, according to the central bank.

"Previously, when the government issued subsidies, there could be certain obstacles before the money reaches the recipients," said G. Bin Zhao, senior economist at PwC China.

"With e-CNY, the cash directly lands into your hands," boosting transparency, he said.

Zhao added that in the future, the government can use e-CNY for pension payments, fiscal subsidies and even infrastructure spending.

Xia Chun, chief economist at wealth manager Yintech Investment Holdings, said that compared with traditional means, e-CNY is more efficient and swift when it comes to subsidies, although he feels the size of the current consumption stimulus is too small.

Lin Yifu, an economist at Peking University said in a speech earlier this month that China should hand out 1,000 yuan to each family in locked-down areas, half of which can be in digital yuan.

In the latest campaign, consumers in Shenzhen can join a lottery for the free e-CNY, which can be used to shop online or at stores. In Xiong'an, digital cash subsidies can be used to buy products including food, electronics appliances and furniture.

($1 = 6.6600 Chinese yuan)

China uses digital yuan to stimulate virus-hit consumption
 

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Comments (2)
la popeye
la popeye May 30, 2022 1:26PM ET
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no need to print. e cny ...just add some on your account. this is exactly why the real crypto was created! not having the hands of government who don t know what they are doing...like printing.no discipline lead to chaos. no budget discipline lead to bankruptcy..!
Zen Cat
LittleZenCat May 30, 2022 1:26PM ET
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“Evil cannot create anything new, they can only corrupt and ruin what good forces have invented or made.” - Tolkien
May 30, 2022 7:47AM ET
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